Union boss threatens to withdraw Labour funding unless Ed Miliband is elected as party leader

One of the country’s biggest unions last night threatend to withdraw funding from the Labour party unless Ed Miliband is elected as leader next month.

Paul Kenny, the General Secretary of the GMB union, said other unions will follow suit if David Miliband or Ed Balls were chosen to succeed Gordon Brown.

The warning, which senior Shadow Cabinet members will view as blackmail, came a week after Lord Prescott revealed that Labour were 'on the verge of bankruptcy'.

Pick Ed: Paul Kenny, the chief of the GMB union, (left) has called on Labour to choose Ed Miliband (right) as the party's new leader

He said that the party was bring kept alive by 'trade union contributions, high-value donations and the goodwill of the Co-op bank'.

Asked by The Times if his union would withdraw funding from Labour if Ed Miliband did not win, Mr Kenny said: 'If the new leader offers us more of the same, many unions — including our own — would have to consider where we are at.

'Ed Balls and David Miliband represent where we’ve been. They are not without talent. I would not rubbish them. But if the direction of the party went off chasing some right-of-centre ground . . .'

He added: 'Ed Miliband is not ashamed of Labour’s core values. It’s not about a big society. It’s about a fair society.'

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In the first half of this year alone, Labour’s top three donors were unions, with GMB coming in at third, donating £1.05million.

They have given £28,000 to the younger Miliband’s leadership campaign.

Labour is currently £20million in debt.

The results of the leadership election will be announced on September 25 and David Miliband is the hot favourite to win, followed by his younger brother and Ed Balls.

Shadow health secretary Andy Burnham and backbencher Diane Abbott are also in the running.

Mr Kenny added: 'Ed Miliband is not the finished product. But David Cameron was not the finished product when he was elected leader of the Conservatives either.'

Mr Kenny’s comments coincide with signs of a deepening rift between the Milibands over the future direction of the party.

Ed has taken a completely different approach to his elder brother - who is keen to emphasise his broad appeal and woo affluent, middle-class voters.

The competition: Paul Kenny said other unions will follow suit if Ed Balls (left) or David Miliband (right) succeeds Gordon Brown

Ed wants to re-engage with traditional Labour supporters and offer the hand of friendship to the Liberal Democrats.

In a speech yesterday, he delivered a new broadside, blasting the adherents of new Labour as out of touch, with his brother at its head.

He said: 'Traditional new Labour solutions won’t work, and that is why I am the modernising candidate in this election.

'New Labour fell in to the same trap as old Labour, clinging to old truths that had served their time.’

He also said the party needed to win back the three million manual workers who had switched to the Tories since 1997 as well as middle-class voters who had gone over to the Liberal Democrats.

David Miliband has the support of the bulk of the Shadow Cabinet, including shadow chancellor Alistair Darling and shadow justice secretary Jack Straw.

Throughout the leadership campaign, things seem to have turned sour in the Miliband camp and the increasingly tense nature of the contest led Ed Miliband to issue a veiled warning to his older brother - that he should 'take special care to continue our debate in the spirit we started out'.

Their mother is understood to have become so frustrated by the political fight between her sons that she publicly admitted that she would back Ms Abbott.

Speaking about the way the previous Labour leaders treated Britain’s unions Mr Kenny said: 'We were smiled at like we were elderly relatives sat in the corner with a party hat on. Access was never a problem — the question was the outcomes.

'The fundamental difference between Ed and his brother is that when David said "Let’s reach out to the middle classes" he made the same mistake as Tony Blair and Gordon Brown. Labour can’t function without its grass roots.'